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Fool Portfolio Report - Monday, July 01, 1996

ALEXANDRIA, VA, July 1, 1996 -- Well, my gut tells me we
had a good day today, but a look at the bottom line reveals otherwise. The
Fool Portfolio surrendered just short of 1 percentage point Monday, doing
the opposite of the general market's 1 percentage point gain.

Look over that list of daily moves in the window below and you'd be saying
to yourself, "America Online, mmm-hmmm. Good one. Nice... yeah, they officially
announced version 3.0 today. OK, Chevron up $7/8? Yeah. Sweet. Good. And
GE too! All right! Well, Gap was even... no sweat. It's been so good otherwise."
Your eye couldn't help but then flick down to those gaudy numbers that Medicis
put up today... "Yowser! MDRX up another $3 3/4? You kiddin' me?! Thing just
keeps going... gotta click over to see if there was any news from Phoenix
today." And then your eye glides over to one other symbol in our ticker-tape
display:

IOMG -2

Yep. It reads to you just that big. Because you know if it's the Fool
Portfolio, it's got about one-third of itself in Iomega these days -- due
exclusively to appreciation -- and so the day ain't gonna end kindly when
you see that big down $2.

In fact, if we actually printed those numbers in a portfolio-and-font-weighted
configuration, they'd look something more like this:

But hey, if we did that consistently, you'd flame us in our Suggestion
Box, and rightly so. You see, it's very dangerous to give us Fools any new
toys to play with... because we probably will. Anyway, differing point sizes
is exactly one of the things that America Online's new version 3.0 for Windows
enables us to do with our articles.

You sit warned.

Even more importantly for many of our readers, AOL today debuted the new
$19.95 for 20 hours monthly plan. (Why am I tempted to write the "$19.95
for 20.05 hours" plan?) Yep, that means a whole lot more Foolishness at a
whole lot better price. For those who have been spending upwards of 5 hours
a month in Fooldom (let alone 5 hours a day, or week!), you can now sign
up for this new pricing plan, and it makes 20 hours online a month look this
way (if I'm doing the math right, here):

$54.20 for 20 hours under the old plan

$19.95 for 20 hours under the new plan

Monthly savings: $34.25

Annual savings: $411.00

Now, if you divide that $411 by Iomega's closing price today, you---

Just kidding.

America Online also got a nice plug today from Lehman Brothers. The Bros.
put out their list of "Ten Uncommon Values," stocks that in the firm's opinion
will outperform the market over the next 12 months, "regardless of the outlook
for an industry or the overall economy." In case you're interested in a few
of the others, they included companies like Boeing, PacifiCare Health Systems,
PepsiCo, and Wang Labs. Every single one of these stocks rose today, most
by a dollar or more.

You want another Hot Picks list? We take you now to the plush offices
of Smith Barney, which today revealed its "10 Plus" list of 15 stocks recommended
over the next 12 months. As you sift through the Aetnas, the Ciscos, and
the Mercks, you can't help but rivet your eye once again on what seems like
everybody's favorite stock these days... General Electric. Yep, it's there,
bless it. Of course, it looks like we'll be parting with our shares via our
Dow Dividend Approach switch in August. But anyway.

GE has indeed been a fine stock to hold... not just over our 10 months,
but for a few decades.

For those who've been holding their breath all report long to find out
what happened to Medicis today, you've reached your paragraph. (Exhale.)
The company had no news to report Monday (at least that's what a check of
the wires indicates). However, crack news staffer MF Selena did discover
an interesting item on another small-cap company making acne drugs. Penederm
(NASDAQ: DERM) received a "non-approvability" letter today from the Food
& Drug Administration for its "Avita" retinoic acid gel for acne treatment.
The reason stated was that results of Avita's second study did not match
up to those posted from the first. (The company stated it has already completed
a third trial, and plans to submit those results to the FDA in two weeks.)

As I personally had never heard of Penederm or Avita, this news surprises
me (1) with its very existence, and (2) because it appears to be pleasantly
decent news for our horse, Medicis (Medicis is the third largest holding
today in the Fool Portfolio.) Until we learn more, I'm unable to say how
truly significant this FDA letter was. What we can say is that Penederm dropped
$3 3/4 today to $13 1/4 following ratings downgrades from Volpe Welty and
Wheat First, and Medicis rose $3 3/4 to a bid of $45. Not bad for a day's
work.

Then there's Iomega. Darn stock got hit up for two bucks today. It wasn't
Craig Crossman's column in the Monday's Miami Herald that did it... Crossman
recommended the Zip drive -- and, in particular, the Jaz drive -- to his
readers.

No, it appears today's bad day was motivated by Iomega's press release
offering a $50 summer mail-in rebate to those who purchase Zip drives from
now till September 15th. Further, over the same period the company will offer
$20 rebates for Zip disk purchases of 10 or more.

Did Iomega need to do this from a price competition standpoint? No...
Iomega is already firmly entrenched as the low-cost provider of information
storage for consumers. The company needed to do this, we believe, to blow
out sales of the product at a time when the guys in Roy have at least a chance
of creating our new standard replacement for the 3.5" 1.44 meg disk. I think
it's smart, but the market never likes price reductions (even temporary ones),
so there you are.

Of course, long-time holders of this stock knew quite a while ago that
the company was calculating this move. Not only has our Iomega folder actively
talked about it, but CEO Kim Edwards himself announced at the company's annual
meeting that his longer term goal was a $99 Zip drive. The key here: the
company has the production to meet the new demand.

Fools like me ain't swayed by market misunderstanding; the truth always
outs over the long term.

Anyway, down $2 for today, and we got toasted.

---David Gardner, July 1, 1996

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